Tough Times Ahead

​https://on.ft.com/3KtQKPL
​There is a growing consensus that tough times are coming our way.  One "solution" that keeps coming up is to invest in "alternatives." 20% of the asset allocation appears to be a common recommendation. But isn't kicking the ball downfield? Most alternatives (notably hedge funds and private equity but increasingly infrastructure, real estate and SEG investments) underperform stock markets, correlate with each other and equities just when you need them, have a wide dispersion in performance between top and bottom tier firms (and top tier firms are often closed to new investors or have prohibitively high minimum investments), and future performance is notoriously difficult to predict based on past performance. One recurring problem is the distortion of investors and their advisors when evaluating alternatives for investments; a distortion that is nicely explained by behavioral finance. First, there is the constant barrage of publicity about these firms.  We know that investors are more inclined to invest in firms that are in the news, whether for positive of negative reasons. There is also a star quality that the asset classes are given. Finally, there is a tendency to publicize spectacular gains or outsized deals rather than an analysis of their performance and risk/return ratios. It might be more useful to admit that markets go through periods of low returns (especially following explosive growth for years) and focus more on avoiding panic reaction to today's headlines or chasing "solutions" that are flawed?